Buyer Didn't Close: Can the Seller Keep the Deposit in Ontario?

The closing date passed and your buyer did not close. You may be carrying a home you thought was sold, with a mortgage, taxes and utilities still running, and you are wondering whether the deposit is yours and what else you can claim.

This article walks through the general rules in plain language: when a deposit may be forfeited, what resale does to your claim and what the courts have said. Every case depends on its own agreement and facts, so speak to a lawyer before you take a step such as relisting or sending a notice.

Is the deposit forfeited?

Ontario appellate law is that a buyer who repudiates the agreement forfeits the deposit, and the seller does not have to prove damages to keep it. In Redstone Enterprises v. Simple Technology (2017 ONCA 282), the Court of Appeal raised the forfeiture to the full $750,000 deposit.

Repudiation means the buyer, by words or conduct, shows they will not complete the deal. A buyer simply being late, or a dispute about whether the seller met its own obligations, can be a different situation. Whether the buyer is truly in breach depends on the agreement and what each side did. In 2651171 Ontario v. Brey (2022 ONCA 148), a buyer who had a valid objection that the seller left unremedied was found not in breach.

Can the buyer get the deposit back?

A buyer can ask the court for relief from forfeiture, but it is discretionary. The buyer must show that the forfeited sum is out of proportion to the seller's damages and that it would be unconscionable for the seller to keep it. The Court of Appeal applied that approach in Ching v. Pier 27 Toronto Inc. (2021 ONCA 551), building on Varajao v. Azish (2015 ONCA 218).

In practice this means a seller should keep records showing what the failed sale actually cost, even though the seller does not have to prove damages to keep the deposit in the first place.

Resale and claiming a shortfall

A seller who resells after the buyer fails to close can sue for the shortfall between the original price and the resale price, plus carrying costs. In Perkins v. Sheikhtavi (2019 ONCA 925), the court rejected the buyer's argument that the contract was frustrated.

Where the seller had not yet resold, the Court of Appeal in Malik v. Attia (2020 ONCA 787) sent the questions of forfeiture and damages to trial. The timing of a resale and what it shows about your loss can therefore matter.

Mistakes that can weaken a claim

• Failing to meet your own obligations, such as dealing with a valid title or other objection the buyer raised.
• Treating a late closing as a repudiation without checking the agreement's wording.
• Relisting or accepting a new offer before getting advice on how it affects your claim.
• Not tracking carrying costs such as mortgage interest, taxes and utilities.
• Assuming the deposit is automatically released to you; the process for releasing it depends on the agreement and the parties.

If you have a mortgage on the home, speak to your lender and lawyer early, since a failed sale also affects the discharge and your next steps.

What to do next

• Gather the signed agreement of purchase and sale, all amendments, notices and any emails or texts about closing.
• Write down the closing date, the deposit amount and who is holding it.
• Note exactly what the buyer said or did, and whether you had met your own closing obligations.
• Keep records of carrying costs from the missed closing date onward.
• Contact a lawyer before relisting, declaring a default or contacting the buyer's side about the deposit.

The case law is clear on the general direction, but the result in any one file depends on the agreement's wording and the facts, so a lawyer should read your documents.

Frequently asked questions